Bank of England set to increase interest rates this week – what a rise could mean for you – MoneySavingExpert

by MoneySaverExpert

Any decision to increase rates again would mark the central bank’s first back-to-back increase since June 2004, coming after it lifted rates from 0.1% to 0.25% in December 2021. Below is all you need to know in terms of your mortgage and your savings but remember we won’t know for sure what the Bank of England decides until Thursday (3 February). 

I have a mortgage. What could happen now if rates rise?

According to UK Finance, 74% of all current mortgages are fixed, meaning for the vast of majority of mortgage holders, nothing will change. The key points for mortgage holders are:

  • Fixes are fixed – but lock in again now if yours is coming to an end soon. As the name suggests, rates WON’T change during the fixed period – though any new fix you remortgage to in future may end up being more expensive, so you might want to check if you can fix now if your current deal is approaching expiry. 
  • Lenders MAY raise standard variable rate (SVR) or ‘discount’ mortgages. These move at the whim of lenders. We’ll check with the big lenders to see what they plan to do if the base rate does rise. You’ll usually be on an SVR after your fix or tracker ends. A ‘discount’ mortgage, meanwhile, follows the SVR at a set rate, eg, if the SVR is 4% and the rate is SVR minus one percentage point, it’s 3%. 
  • On a tracker mortgage? Rates will increase. As the name suggests, these ‘track’ the base rate, so mortgage costs will go up if the base rate increases, so check now to see if you can switch to a better deal.

What should I do?

  • If you’re on a fixed rate that is coming to an end in the next three to six months, you could start speaking to a mortgage broker now to see if you can remortgage onto a better deal, as you are able to lock in deals available now for the next few months.
  • If you’re on a standard variable rate (SVR) or ‘discount’ mortgage, your mortgage is likely to rise by 0.25 percentage points if the base rate increases on Thursday. If you’re on a tracker mortgage your rate will definitely rise by the same amount as the base rate, for example, 0.25 percentage points. SVRs are pricey though and tracker mortgage rates could increase, so if you’re on one, consider fixing now in case rates go up further. 

If looking for a new deal, see our Remortgage Guide or First-Time Buyers’ Guide for help, plus our Mortgage Best Buys comparison tool for the top deals. The table below lists some of the leading mortgage brokers that can help save you time when looking to remortgage.

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